Decoding Compliance

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The Latest or ig i nat ion ANALYTICS FDIC Sees Improvements in Deposits Banks insured by the FDIC logged near record annual earnings at the end of last year. S e c on da r y M a r k e t a na ly t ic s se r v ic i ng I Inventory Slides as Prices Climb Declining inventory levels are putting the seller in the driver's seat, causing an uptick in home prices. N ational asking home prices have risen 7 percent year-over-year since bottoming out last February, Trulia revealed in its February Price Monitor Report. Seasonally adjusted, asking prices increased about 1.4 percent from January and 3 percent quarter-over-quarter, marking two post-recession highs. Nationally, inventory fell 23 percent year-over-year in February, according to data provided from the Department of Numbers. Inventory fell year-over-year in all of the 50plus markets tracked, dropping more than 50 percent in several California metros. Trulia noted that nearly all of the metros with the biggest inventory declines also had year-over-year price 60 | The M Report increases in the double-digits, such as Sacramento (18.1 percent), San Jose (18.5 percent), and Seattle (13.1 percent). Jed Kolko, Trulia's chief economist, explained that while falling inventory boosts prices, the relationship works both ways as sellers start holding out in hopes that prices will continue to increase. However, that cycle only works short-term. "[L]ess inventory leads to higher prices, which leads to less inventory, and so on. But the inventory spiral can't go on forever because eventually rising prices will encourage homeowners to sell and builders to build, which add to inventory and breaks the spiral," Kolko wrote in a blog for the company. "The critical question for the housing market—especially for buyers fighting over tight inventories—is how long until that kicks in?" While inventory decline has slowed from its pace in mid- to late-2012, Kolko posits that it could be at least another year before inventory starts expanding at the national level. "The experience of metros where prices bottomed earliest suggests that inventory continues to decline even after two years of price increases. It also means that inventory should turn around first in metros where prices bottomed first, such as Phoenix, Miami, Detroit, Houston, and Oklahoma City, and later in metros where prices bottomed more recently, such as Sacramento and California's Inland Empire," he wrote. nstitutions insured by the Federal Deposit Insurance Corporation recorded their second-highest annual earnings ever in 2012, according to the FDIC's Quarterly Banking Profile for the fourth quarter of 2012. High noninterest income and declining loan loss provisions contributed to the increase, according to the FDIC. Net income for all FDIC-insured institutions over the year was $141.3 billion, a 19.3 percent increase from net income recorded in 2011. The factor contributing most to this increase was a 24.9 percent reduction in loan loss provisions, according to the FDIC. Rising noninterest income—up 8 percent from 2011—also contributed to increased earnings in 2012. Earnings in the fourth quarter alone were 36.9 percent higher than their year-ago levels. Total fourthquarter earnings reached $34.7 billion for the fourth quarter. In fact, 60 percent of the 7,083 institutions insured by the FDIC reported a year-over-year increase in earnings in the fourth quarter. Fourteen percent reported losses in the fourth quarter, down from 20 percent in the fourth quarter of 2011. Average return on assets at the institutions is also up from last year, now standing at 0.97 percent, up from 0.73 percent a year ago. Increased gains on loan sales, rising trading revenues, and diminishing losses on foreclosure sales all contributed to the rise in noninterest income in the fourth quarter, according to the FDIC. While more institutions added to their reserves than reduced them in the fourth quarter, total reserves at FDIC institutions declined by $5 billion in the fourth quarter, marking the 11th consecutive quarter of reserve declines at FDIC banks. At the same time, a little more than half—53.6 percent—of FDIC-insured banks lowered their loss provisions. The $15.1 billion recorded in the fourth quarter is 24.6 percent lower than the amount recorded a year ago and marks the 13th consecutive quarter of loss provision declines. The total number of institutions insured by the FDIC decreased from 7,181 to 7,083 in the fourth quarter as 88 banks merged with others and eight failed.

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